Although life insurance is an essential part of financial planning and can be confusing, it’s important to understand insurance and choose the right product. Although you can rely on your agent’s expertise and recommendations, it is always a good idea for you to do your research. These are five things to remember before you purchase insurance.
1. Why life insurance is important. All of us want to ensure financial security and the future of our families. This includes making sure that loved ones are taken care of in the event we die, our spouse dies, or the death a parent. Insurance can offer protection in many ways. It can help you save money for retirement, pay off your mortgage, or even cover college tuitions. Insurance is an important part of estate planning.
2. How much life insurance you require. When deciding the right amount of insurance for your family and you, there are many things to consider. These factors may change with time. It is important to fully understand the purpose, policies and benefits of insurance, as well as the premiums and benefits. These are some things to consider when deciding how much insurance you need.
*How much your family will need to comfortably live if you die
*Whether you have a mortgage or your home is fully paid off
*If you own a business, what financial impact will your death have on the company
*Whether your family has the financial resources to pay your funeral expenses
*The cost for legal and financial assistance in managing your estate
*Whether you will leave an estate tax burden on your heirs if your death occurs
3. There are many types of insurance. After you have decided how much insurance you need to cover your needs, you can decide whether you want term or whole-life insurance. These are the basics.
*Term life insurance: Unlike its name, term life offers protection for a set period of time. Your beneficiaries will receive the policy’s value if you die during this time. Term life insurance is most popular because it can pay off any outstanding debts, such as mortgages, in the event you die prematurely. Also, premiums are usually lower if you buy it earlier. For the same amount, someone in their 20s will pay a lot less than someone in their 80s.
*Whole-life insurance: Your whole life insurance policy will continue to be in force throughout your life as long as the premiums are paid. Whole life insurance policies can be used as collateral to obtain loans and cash payments. Although whole insurance premiums are typically more expensive than term, younger families should consider buying term life. You can convert your term life policy later to a whole-life policy.
*Universal Life: This insurance policy provides permanent insurance protection. However, it differs from whole-life in that you can choose the level of protection that is most appropriate for you, your family and/or your company. As your insurance needs change you can adjust the coverage and control the amount of premium payments.
4. Insurance costs are affected by risks. Insurance premiums are determined by many factors such as age, health and use of tobacco. You are young and in good health. Now is the best time to get insurance.
5. How to find the best insurance agent. A trusted independent agent can help you choose the right type and amount of insurance. There are many factors to consider. Independent brokers can access more insurance products and are more invested in your financial future. Do your research, ask questions and be familiar with your policy before you sign the dotted line.